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The Impact of Working Capital Management on the Financial Performance of the Energy Sector of Saudi Arabia
Saleh, Alaa
Saleh, Alaa
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Abstract
This study aims to investigate the relationship between working capital management (WCM) and the financial performance of the Saudi energy sector. Previous research indicated that working capital management consists of managing five core components: Cash, Accounts receivable, Accounts payable, Inventory and Short-term debt. However, the impact of only three of them on the financial performance will be examined. These three are: Accounts receivable, Accounts payable, and Short-term debt. Furthermore, the data were collected from the financial statements of all the six energy companies listed in Tadawul during the period of 2019-2022. In this study, Current ratio is used as a proxy for WCM while Return on Assets is used to assess the financial performance. In addition, Debt to Equity ratio is used as a moderate variable to examine the leverage impact on the financial performance. To analyse these variables, a linear regression model is used. Results show that there is not enough evidence to say that working capital management affect the financial performance of the Saudi energy sector, which is not the case for leverage as it does impact the sector. In addition, possible justifications for these findings are provided. Finally, this study recommends other research to investigate why working capital management may not impact the financial performance of the Saudi energy sector.
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